Regulations and established rules dictate how financial instrument market centers, including securities market centers, must interact with one another and, specifically, how orders are to be handled among market centers. Some present market center rules and regulations for some markets dictate that when an order is placed on a market center, it is to be executed at the best bid or offer price presently available in the entire market (“Market. Best Bid” or “Market Best Offer”), regardless of whether the market center that the order was sent to is presently offering the best bid or best offer price. If a market center receives an incoming marketable order (i.e. an order whose price is at or better than the opposite side of the Market Best Bid or Best Offer price) and cannot match that order within its own order book, then that market center must route all or part of the order to the market center then presently posting the Market Best Bid or Best Offer price.
While these rules and regulations are designed to give a securities trader the benefit of having his order executed at the best price available in the market at the time, traders sometimes want their orders only executed on the market center to which they sent the order, trading off speed of execution versus best price. These traders do not want their orders to leave the market center to which it was sent. Traders can make this request as long as their order does not lock or cross the away market. A trader's order would lock the away market if the trader's order price has the same price as the Market Best Bid or Best Offer price then available on the opposing side of the market (i.e. the trader's buy order price is equal to the Market Best Offer price or the trader's sell price is equal to the Market Best Bid price). A trader's order price would cross the away market if a trader's buy order price is higher than the Market Best Offer price or if a trader's sell order price is lower than the Market Best Bid price. Such trades are not allowed, according to presently applicable rules and regulations in some markets, because, if allowed to execute, they would create an anomaly in the market where one market center is executing orders at prices that are outside of the Market Best Bid or Best Offer price (i.e. outside of the “inside spread”). As a result, in prior systems, if a trader's market center-restricted order locks or crosses the away market, it is canceled. Traders in prior systems typically have to choose between pricing an order aggressively to maximize trading opportunities or risk having the order cancelled because the trader has priced it through the market (i.e. priced it so that it would lock or cross the away market).
With some securities or financial instruments in certain issues, however, market centers are granted a limited price exemption wherein a market center having a market center-restricted order can “trade through” a potential away market lock or cross up to a specified amount. In such circumstances, canceling a market center-restricted order that is not immediately marketable because it crosses or locks the market, as is presently the practice, is excessive because this same order would be marketable if an acceptable contra-side order was then available in the posting market center's order book.
Accordingly, there is a need for a market center order processing method and system where a trader can designate that an order only execute on a specific market center and that order, in a limited price exemption environment, will not be cancelled if it locks or crosses the away market.